Mortgage rates continued their upward march this week, with the average rate on the most widely used U.S. home loan reaching its highest point in 13 months and adding further pressure to an already sluggish housing market.
Freddie Mac reported Thursday that the average rate for a 30-year fixed mortgage increased to 6.71%, up from 6.66% a week earlier. At the same point last year, the average stood at 6.50%.
The increase translates into potentially hundreds of dollars in additional monthly expenses for some borrowers, reducing how much prospective buyers can afford to spend on a home. Rising financing costs can also convince would-be buyers to remain on the sidelines, contributing to the persistent weakness in home sales this year.
At 6.71%, the average 30-year rate is now at its highest level since July 31, 2025, when it reached 6.72%.
Rates also moved higher for 15-year fixed mortgages, which are frequently used by homeowners seeking to refinance. The average increased from 5.98% last week to 6.04% this week, compared with 5.60% one year ago.
A variety of economic forces influence mortgage rates, including inflation, Federal Reserve interest-rate policy and investors’ expectations about the economy. Home-loan rates tend to move in the same general direction as the yield on the 10-year Treasury, a key benchmark used by lenders when determining mortgage pricing.
The war between the United States and Iran has been a major factor pushing both mortgage rates and bond yields upward this year. Surging crude oil prices have heightened fears of additional inflation, while long-term Treasury yields have remained significantly above the levels seen before the conflict erupted in late February.
Those concerns intensified over the past week as renewed fighting between American and Iranian forces put additional pressure on global oil markets and sent crude prices higher. Rising energy prices can contribute to broader inflation, which in turn tends to push bond yields upward.
The yield on the 10-year Treasury stood at 4.74% around midday Thursday, compared with 4.67% the previous Thursday. In late February, before the Iran war began, the yield was just 3.97%.
Another source of upward pressure on long-term Treasury yields has been mounting concern over the size and growth of the federal government’s debt. Those worries became significant enough to prompt intervention by the U.S. Treasury Department last month.
With inflation remaining stubbornly elevated, attention is increasingly turning toward the Federal Reserve and whether policymakers will take additional steps to bring price increases under control.
Federal Reserve Chair Kevin Warsh signaled last week that policymakers remain concerned about the inflation outlook. Speaking at the central bank’s annual economic symposium in Jackson Hole, Wyoming, Warsh said inflation had not improved sufficiently and suggested the Fed could have “more work to do,” raising the possibility of an interest-rate increase when policymakers meet Sept. 15-16.
Investors on Wall Street generally expect the Fed to increase interest rates before the end of the year in an attempt to restrain inflation, which continues to run well above 3%. The central bank’s stated inflation target is 2%.
While the Federal Reserve does not directly determine mortgage rates, its decisions on short-term interest rates can influence expectations in the bond market and ultimately affect 10-year Treasury yields, which in turn help determine borrowing costs for homebuyers.
“We don’t expect any real mortgage rate relief this fall, but if inflation isn’t tamed, the pain will be real,” said Jiayi Xu, senior economist at Realtor.com. “Higher inflation would simultaneously erode paychecks and real income growth while keeping mortgage rates elevated for longer. That’s a squeeze on housing from both sides: what people can afford, and what they’re willing to buy into.”
The latest increase adds another obstacle for a U.S. housing market that has struggled since mortgage rates began climbing from their pandemic-era lows in 2022. Sales of previously owned homes were essentially unchanged last year and remained near a 30-year low, while sales weakened again in July.
{Matzav.com}
